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You are offered a note that pays $1,000 in 15 months for $950. You have $950 in a bank that pays a 6% nominal rate,
You are offered a note that pays $1,000 in 15 months for $950. You have $950 in a bank that pays a 6% nominal rate, with monthly compounding, which is a monthly rate of 0.5%. You plan to leave the money in the bank if you dont buy the note. The note is riskless. Should you buy it? Use future value, present value, and effective annual rate to support your decision.
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